Last month, cloud storage provider, Nirvanix, announced that the company had “gone to the wall” on its financing and would no longer be able to continue operations. Customers were advised that new replication would cease and they had until the end of the month to transfer data off of Nirvanix servers before the service was terminated. Yikes. With hundreds of customers needing to move data (estimated to be in the petabytes) and an exit window of less than two weeks, it is easy to guess that there are several hundred CIOs who have had a stressful few weeks.
Sadly, the shutdown is likely to create a ripple effect in the enterprise startup ecosystem. It has the potential to become a cautionary tale for CIOs considering cloud storage or other cloud-hosted IT infrastructure products. As one of the highest profile enterprise closures in recent memory, it should be instructive for IT managers and enterprise startups and spur thinking about one key capability that is mentioned infrequently: reliability.
Reliability plays a factor in two ways:
Product Reliability: The near term likelihood of the product being accessible.
Firm Health: Whether the company will be able to support product operation on a longer time horizon.
Service levels in both categories influence purchasing decisions in the enterprise and are key to mitigating customer concerns about being locked in with a “shaky” vendor.
“Uptime” is often cited as a prime concern for all cloud technologies, including SaaS solutions. While Nirvanix is an extreme case of (potentially) catastrophic data loss, there are less dramatic cases that would cause significant loss of time and resources to clients. For example, the closing of a cloud CRM provider, even with adequate notice, would inevitably cause disruption to a customer’s normal business flow as they migrate to a replacement.
Nirvanix illustrates the double-edged sword that is cloud delivery of product; it has increased financial and operational flexibility but simultaneously increases vendor risk. Currently, there is no quick way to determine the level of these risks as most enterprise startups are in the growth phase of their lifecycles. Sheer scale of funding alone is no guarantee of reliability. Nirvanix raised $70m in financing with the most recent round being $25m in May 2012 and still shut with little to no warning.
So what are CIOs to do? Where are they going to go for information and transparency?
Enterprise startups should be bringing information to CIOs through active marketing. CIOs and enterprise architects are already sifting through a crowded service provider space. Building a marketing strategy around reliability is a way for startups to break through the noise and position themselves for a future of tightly integrated, third-party systems.
Forrester predicts that by 2015 the average firm will subscribe to 8-12 SaaS applications, all of which will grow to depend on each other. Services and applications that cannot work reliably in a tightly integrated system are likely to fall by the wayside as coordination becomes key to survival. The implication for enterprise startups is to continue improving product functionality and usability but also to focus on reliability as a key differentiating factor in the market.
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